What Does the Organised Sector Worker Bill Really Mean?

Jun 01, 2018 | 1 year ago | Read Time: 4 minutes | By iKnowledge Team

Earlier this year, the Lok Sabha passed a bill that will now allow employees in the organized sector to get tax-free gratuity up to Rs. 20 lakhs, and also gives the government the power to fix maternity benefits for women through an executive order.

What is the amendment?

The Payment of Gratuity (Amendment) Bill was introduced by labour minister Santosh Kumar Gangwar in December last year, aiming to allow organised sector employees to have gratuity tax exemption at par with central government employees. Before the bill was passed, workers in the formal sector were entitled to tax-free gratuity of Rs.10 lakh, however, since the seventh pay commission increased this amount, the bill became a necessity.  

The bill was first introduced in 1972 to ensure gratuity payments to employees working in factories, mines, mills, oilfields, plantations, ports, railway companies and other similar establishments. The bill is applicable to all employees who have finished five years of continuous service in an establishment, whereby, an establishment is defined as any entity employing 10 or more people.

What does this mean?

The bill was passed in the Lok Sabha any retaliation and Prime Minister Narendra Modi shortly afterwards tweeted the importance of the bill for the country. “A significant pro-people measure passed in Parliament. Will benefit lakhs of Indians,” he tweeted.

tax free gratuity

Furthermore, it is important to note the political and social climate during which the bill was passed. In the months leading up to the vote on the bill, there was a slew of anti-government protests from farmers and organised sector employees. In fact, in March -when the bill was passed- farmers in the country led a 200-kilometer march to persuade the government to meet their deferred promises of land, minimum price increases, loan waivers amongst others.

The bill which is considered a pro worker move, will benefit millions of workers in the organized sector in India, and gives the government the power to amend gratuity payments in line with the benefits for central government employees with an executive order, without having to go through the parliament again.

What does the amendment mean for women?

Another very important aspect of the bill is that it grants the government the power to fix maternity benefits for women through an executive order, without having to go through the Parliament. The amendment, which comes under the backdrop of the Maternity Benefit (Amendment) Act of 2017 which enables women in the sector to get six months of paid maternity leave. The move grants women double the paternity leave currently granted, marking a huge shift in women’s maternity rights in the country.

Women Amendment

The Act allows women to take 26 weeks of paid leave for first two children and 12 weeks for any children after that. Additionally, it also includes a provision for commissioning and adopting mothers, although the upper limit for their maternity leave is capped at 12 weeks. The new legislation also mandates that companies with over 50 overall employees or 30 women employees will have services to allow women to work from home and open day care facilities for women.

The amendment to the gratuity bill is important as now the central government has the autonomy to modify maternity leave for female employees “deemed to be in continuous service.” While South Asian countries, particularly India have always been low performers on the Global Gender Gap Index, the move puts India ahead of even several developed nations, when it comes to maternity rights.

financing in relation to maternity leave

According to data provided by PRS Legislative Research, the United States gives only 12 weeks unpaid maternity leave to women, while Canada, Brazil and South Africa offer 17 weeks of paid leave. Singapore and France offer 16 weeks of leave and China offers 14. The longest paid maternity leave is offered by Australia and the United Kingdom, at 52 weeks, although the rates at which women are paid varies between the two countries. Additionally, the source for funding for paid maternity leaves also varies worldwide. While in India, the financing for the same comes from the employer, in Canada and Australia the same is completely funded by the government. In several countries, the financing for maternity leaves comes from a combination of contributions by employers, governments and personal investment.

The Bill is a great move for workers around the country and will stand to benefit millions of organised sector workers and over 1.8 million working women in the country, by giving the gratuity they deserve and making the Indian tax system more equal.

Advt. no.: IA/MAY 2018/4000


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